When the Bureau of Labor Statistics (BLS) reported a gain of 290,000 jobs last Friday, it was a net number — the difference between the number of new jobs being created and the number of people losing their jobs.

People lose there jobs in several different ways. They can be fired, laid-off, quit or retire. What the employment report does not show is the composition of that net number: how many new jobs, and how many people lost their jobs.

That data is presented in the Job Opening and Labor Turnover Survey (or JOLTS), which was released today, but with a one month lag. So the data in the graph below (from http://www.calculatedriskblog.com/) is for March, not April.

What that data shows is that the problem is not a large number of people losing their jobs. The number of people losing or leaving their jobs is actually more than 25% below where it was in the spring of 2006, which supposedly was the height of the “Bush boom” (which was more of a firecracker than a real explosion).

However, back then a much higher proportion of the people leaving their jobs were doing so voluntarily. Indeed, the number of people getting fired or laid off (gold line) is now at one of the lowest levels in the history of the survey (which unfortunately only goes back to 2001), after spiking in the last half of 2008.

Not surprisingly, the number of people who quit their jobs, or retired voluntarily, dropped during the recession (the difference between the gold line and the red line). The problem has been, at least since the middle of 2009, not with too many people being fired, but with not enough new jobs being created.

In February and March, the rate of new hires (blue line) did pick up a little bit, but it remains at a very low level. The difference between the blue line and the red line corresponds to the number of jobs gained or lost in the economy in the establishment part of the monthly employment report.

A Recent History

The U.S. is still a fairly dynamic place when it comes to employment, but much less so than it used to be. Each month, normally about five million people lose their jobs, and about five million start new jobs. The number of people being hired started to decline sharply in late 2006 from a level of over 5.5 million new hires per month. During all of 2007 and 2009, the number of people losing their jobs held steady. The net result was a massive net loss of jobs.

However, during 2008 there was a huge increase in the number of people who lost their jobs involuntarily, and an almost one for one decline in the number of people who left their jobs on their own. Since the start of 2009, the number of people who leave their jobs of their own accord has stayed steady, while the number of layoffs has plummeted.

That caused the rate of net job losses to plunge from the horrifying levels of over three quarters of a million jobs a month being lost in late 2008 and early 2009 to minimal levels in the second half of 2009, and into job gains so far this year (remember, this data is only through March; the April numbers will show either a further decline in the number of people losing their jobs, or a pick up in the number of new jobs being created, or both).

In March this year, there were a total of 4.242 million people who got new jobs, up from just 3.670 million who found new jobs in March of 2009. The total number of people who lost their jobs fell to 3.698 million this year versus a total of 4.444 million who lost their jobs in March of 2009. A year ago, 55.4% of those who lost their jobs, lost them involuntarily. This year, that percentage has fallen to 49.5%.

The number of job openings has started to increase (the job openings numbers are a snapshot of the last day of the month, while the hires and fires are the totals for the month), but they still remain far below the worst points of the 2001 recession and the jobless recovery that followed it.

One of the key implications of this slowdown in overall labor mobility is that if you are one of the people who does get laid off (most people who quit already have another job lined up or are retiring) it becomes very hard to land a new job. This helps explain why the duration of unemployment figures are simply off the charts in this recession. An astounding 6.716 million people have now been out of work for more than 6 months — that is 45.9% of all the unemployed. Half of all the unemployed have been looking for more than 21.6 weeks.

As the second graph below shows, not only is the median (and mean) duration of unemployment at a record, it is almost twice as high as it got to at the worst point of any previous downturn. Unfortunately, we only have the net number of jobs created or lost for all those recessions, with the exception of the relatively mild 2001 recession. However, I would suspect that in those downturns, the rise in unemployment was primarily due to people getting laid off, and only secondarily because a decline in the number of new jobs being created.

What would account for this very sharp decline in the rate of labor force turnover in just a couple of years? It is unfortunate that we don’t have the data to see if this is a normal occurrence in a recession, or if this is something unique to this recession. It is worth noting, however, that the slowdown in labor force turnover started almost a year before the recession officially started in December of 2007. Part of the reason might be the collapse of the housing bubble.

Less Workforce Mobility in the U.S.

One of America’s great strengths, particularly relative to Europe, has always been a high degree of geographic mobility in the workforce. If there are no jobs in Detroit, people will pack their bags and move to Dallas or Denver to get a new job. By contrast, there are not going to be a lot of Greeks moving from Athens to Amsterdam to find new jobs.

Part of that is the language issue, but even within countries of Europe, a smaller proportion will move from, say, Bonn to Berlin in search of new work than move from Portland, Maine to Portland, Oregon to get a new job…or at least that has historically been the case. The collapse of the housing market may well have changed that, at least to a degree.

With 24% of all houses worth less than the mortgage on the house, people who want to move will have to bring their check books with them to the closing if they need to sell and move. People who are unemployed, almost by definition, don’t tend to have a lot of money in their checkbooks to do so. They stop paying until the sheriff shows up at the door solution doesn’t really help, since that makes it very difficult to buy a new house in the new city.

The plunge in the rate of overall job losses since the start of 2009 has been downright stunning, particularly the decline in the number of people being laid off, which is down by almost one third. Unfortunately, that was only matched by a stabilization in the number of people getting hired, not an increase, at least until the start of this year.

Jobs, Taxes and Education

This suggests to me that the Stimulus Program has been far more successful in the saving than creating part of its goal of saving or creating four million jobs. The money that went to the states to help shore up education budgets (almost $100 billion of the $787 billion total) is a good example of this.

It is not that the school districts went out and hired a lot of new teachers and guidance counselors, it simply prevented them from being laid off. Given the absolute collapse in tax receipts at the state and local level (mostly dependent on sales and property taxes), those lay-offs would have occurred. They are probably still coming since those monies have largely been spent, and there is no appetite right now to renew them. In the current climate, local levies for school districts are not doing well, even if they are replacement levies.

It is sort of ironic that the main argument for cutting spending now is that we will leave our children a bleak, debt-laden future if we don’t reduce the deficit. While that might be true, just how bright a future do you think our children will have if they are all illiterate and innumerate?

Supposedly, we have to keep taxes on capital gains and dividends low since raising them will hurt economic growth. Just how much economic growth do you think this country will have without an educated workforce? Will Apple (AAPL) still be able to design innovative products that the world wants to buy if it can’t find engineers who understand math? Or will Apple have to import all that talent from India and China? If so, why do it here rather than in India and China?

As it is, those places are producing far more engineering graduates than we are each year, and their best schools easily rival our best, and our best are in large part filled with students from India and China, in any case.

Capital Gains Tax?

I would submit that raising taxes on capital gains to ordinary income levels would be a far less damaging way to close the budget deficit than slashing spending on education. That is particularly true for relatively short-term capital gains on mature, well-established companies.

Long-term (say five years) capital gains on start-up firms might be a different story. Those could also be targeted better to investments made inside the U.S. As it stands now, if I buy 100 shares of China Mobile (CHL) today and sell it a year from now at a 20% profit, that income is taxes at the same 15% rate that I would earn if I invested in a small start up here in this country that produced jobs here.

While I like CHL as a large dividend-paying company at a very reasonable valuation, it is a play on growth in China, not America. How that investment has helped U.S. economic growth and should thus be favored over what I earn in my paycheck is a bit of a mystery to me. How that low rate helps our future as a country relative to laying off teachers is an even bigger mystery.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.

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